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Michael Dell: Today's Innovative Products Are Tomorrow's Standards

He says companies must collaborate with customers to understand how their business processes will be affected by new technology.
Michael Dell decided long ago that if he was going to run a successful PC business, he wasn't going to be able to build everything on his own. Two decades later, Dell's reliance on technology standards and distributed research and development have served his company well.

Dell on Wednesday addressed a gathering of industry analysts and reporters in Austin, Texas, about the need to invest in innovative technologies that will be tomorrow's standards. "You have to find companies that are innovating in an efficient way and are getting these innovative products out to customers," he said.

Customers ultimately decide what will become standard technology and what will be relegated to niche functions. "Technology companies are notoriously bad at predicting uses for new technologies," Dell said. "It takes collaboration with customers to understand how their business processes will be affected by the new technology."

Dell shared the floor with Bill Gurley, an analyst with venture-capital firm Benchmark Capital, and Henry Chesbrough, executive director of the University of California at Berkeley's Center for Technology Strategy and Management.

The "three biggest events in openness"--the PC, Ethernet, and the Internet--began as innovations and eventually became standards, Gurley said. Today's emerging technology--wireless' 802.11 and open-source software, in particular--will become tomorrow's standards. "Anyone trying to develop a soup-to-nuts proprietary system will have a hard time competing," he said.

As if to underscore the success of its philosophy of standardization and customer collaboration, Dell Inc. said Wednesday that it will beat earlier predictions for its first-quarter sales by $200 million. The company projects quarterly revenue of $11.4 billion, up 20% from the same quarter a year ago. The company attributes much of this increase to growth in markets outside the United States.

However, Dell's global expansion is about more than increasing revenue. "Asia, in particular, is one of the most difficult markets for U.S. vendors because of the presence of local technology companies," Chesbrough said. Pre-emptive competition in the Asian market ultimately helps protect market share at home by making it tougher for companies such as Fujitsu, Hitachi, and NEC to increase their market share for certain commodity products in their own country. "If you're forfeiting the Asian market to a local competitor," he said, "you run the risk of eventually opening up the U.S. market to that competitor."